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Fidelity Signals Ethereum’s Potential Undervaluation Amidst Bearish Trends
Fidelity recently published its Q1 2025 Signals Report, implying that Ethereum (ETH) might be undervalued in the current market environment. Although Ethereum has persistently underperformed over the last few years, the report indicates potential optimism based on various metrics.
Current Market Dynamics
Despite a challenging start to 2025, Ethereum’s performance has raised concerns among investors. Following a substantial 45% drop from a January peak of AUD 5,606 (USD 3,579), bearish momentum has continued, highlighted by the emergence of a ‘death cross’ in March. This technical formation occurs when the 50-day simple moving average (SMA) dips below the 200-day SMA, typically signalling weakening price trends.
Nonetheless, the MVRV Z-Score—a critical tool for evaluating whether an asset is overvalued or undervalued—has provided some grounds for optimism. Ethereum’s recent reading of -0.18 indicates it may be undervalued, suggesting that we could be witnessing a potential market bottom.
Data Insights
Fidelity’s report reveals that Ethereum’s current market capitalisation relative to Bitcoin mirrors levels seen in mid-2020, showing a consistent decline since late 2022. This troubling trend has persisted for more than 30 consecutive months, reflecting Ethereum’s declining performance as compared to Bitcoin.
On a more positive note, the Net Unrealised Profit/Loss (NUPL) Ratio stands at zero at the end of Q1, often interpreted as a signal of ‘capitulation’ in market sentiment. This suggests that considerable downward movement may have already transpired.
Additionally, Ethereum is experiencing a surge in network activity, with a record 13.6 million unique addresses engaging with Layer-2 solutions. This uptick is a promising sign for Ethereum’s scalability and overall ecosystem activity. Furthermore, ETH has recently managed to surpass the 12-hour Ichimoku Cloud indicator, marking the first time it has done so since December 2024, potentially indicating an upward trend if it maintains this position.
Expert Perspective
While several metrics suggest ETH could be approaching a market bottom, the prevailing macroeconomic challenges and ongoing bearish trends warrant caution among investors. Fidelity echoes this sentiment, asserting that while long-term valuations for ETH appear favourable, those engaging in short-term trading should proceed with care to navigate the current uncertainties.
Conclusion
In summary, while Ethereum faces bearish momentum and macroeconomic headwinds, several indicators point to a potential undervaluation. Investors are advised to remain vigilant and assess the evolving landscape carefully, as opportunities may arise amidst the current market conditions.
